Correlation Between Capital Drilling and Melia Hotels
Can any of the company-specific risk be diversified away by investing in both Capital Drilling and Melia Hotels at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capital Drilling and Melia Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Drilling and Melia Hotels, you can compare the effects of market volatilities on Capital Drilling and Melia Hotels and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capital Drilling with a short position of Melia Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Drilling and Melia Hotels.
Diversification Opportunities for Capital Drilling and Melia Hotels
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Capital and Melia is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and Melia Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melia Hotels and Capital Drilling is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capital Drilling are associated (or correlated) with Melia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melia Hotels has no effect on the direction of Capital Drilling i.e., Capital Drilling and Melia Hotels go up and down completely randomly.
Pair Corralation between Capital Drilling and Melia Hotels
Assuming the 90 days trading horizon Capital Drilling is expected to generate 10.19 times less return on investment than Melia Hotels. In addition to that, Capital Drilling is 1.23 times more volatile than Melia Hotels. It trades about 0.01 of its total potential returns per unit of risk. Melia Hotels is currently generating about 0.07 per unit of volatility. If you would invest 456.00 in Melia Hotels on September 20, 2024 and sell it today you would earn a total of 296.00 from holding Melia Hotels or generate 64.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Drilling vs. Melia Hotels
Performance |
| Timeline |
| Capital Drilling |
| Melia Hotels |
Capital Drilling and Melia Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Drilling and Melia Hotels
The main advantage of trading using opposite Capital Drilling and Melia Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Drilling position performs unexpectedly, Melia Hotels can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Melia Hotels will offset losses from the drop in Melia Hotels' long position.| Capital Drilling vs. Indutrade AB | Capital Drilling vs. Auto Trader Group | Capital Drilling vs. Evolution Gaming Group | Capital Drilling vs. Qurate Retail Series |
| Melia Hotels vs. Samsung Electronics Co | Melia Hotels vs. Samsung Electronics Co | Melia Hotels vs. Hyundai Motor | Melia Hotels vs. Reliance Industries Ltd |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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